suze orman july 2012
Photo: Robert Trachtenberg
Q. When is it time to abandon a business? My husband was laid off in 2009, and shortly afterward we started working on a business idea. We spent his severance and our savings, and I borrowed $25,000 from my parents to keep us afloat. After many delays we finally opened, but our first year has been slow and sales aren't looking up. We're thinking of selling our home to cover expenses. Quitting seems foolish because we've invested so much, but if this doesn't work—and soon!—we may have permanently destroyed our finances. We're both in our mid-50s.

Suze: I know it is very hard to walk away from something you poured so much time and money into—but walk away you must. You didn't tell me how you were going to make the business viable. Nor did you even hint that it might be about to turn a corner. Instead you say that after relying on your parents to keep you afloat, you're now going to sell your home to buy more time.

Sweetheart, when that money runs out, what exactly is your plan? It doesn't sound as if the business will be profitable any time soon. If you're not in credit card debt, I don't want you considering that temptation. And don't tell me you plan to raid your retirement savings (though I'm guessing you may have already made this costly mistake). That is never, ever permissible.

You have it wrong: The foolish move wouldn't be quitting—it would be digging a deeper financial hole. I want to be clear that I applaud your intentions. It took initiative to bounce back from a layoff with a business idea. Sadly, though, it takes more than effort to make a go of a start-up. You also need a large financial cushion—on top of your eight-month emergency fund—and a killer business plan that has been carefully vetted. The best decision you can make right now is to close up shop. The business failed. You didn't.

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